2023 historic low sales of Singapore’s good class bungalow market
Rents, crazy deals and crazy rich deals
The media has reported that four important GCBs were completed on Nassim Road during the period March-April of 2023. These deals are not included in last year’s caveats. No caveats have been lodged.
Cuscaden Peak Investments recently sold a trio of GCBs (three GCBs) to the Fangionos behind Singapore listed palm oil producer First Resources. This portfolio was valued at S$206.7million ($4,500 psf). A member of Fangiono’s family had previously purchased a GCB for S$88.7m ($3,917 psf) just down the street. If these transactions had been included in the average, then it would have raised the price (psf).
Rents in the GCB sector have grown astronomically in recent years. Some bungalows are rented out at over S$100,000. Many tenants pay three or more years of rent in advance. Three bungalows were let at more than S$100,000 per month in both 2021-2022. Four bungalows had been rented for this amount in 2023.
The party ended more or less after the high profile money laundering bust of August 2023. Many of these “wealthy landlords” were either arrested or left the country.
As a direct result, several bungalows were left vacant. They are now available for rental. Even when renting at more reasonable rates, property owners are taking longer to find replacement tenants. This is because the stigma of former occupants has a negative impact on their properties. By the end of 2023 and into the fourth quarter, asking rents were down by 30% or even more for GCBs.
Good Class Bungalow Area sales will drop to an historic low by 2023. Buyers, however, are patiently waiting for the price to be dropped.
Singaporeans have a strong desire to own land because it represents prestige and status.
Singapore, a land-scarce nation, values this housing because it is rare to find such large houses on land plots. Singaporeans only own 5 per cent of landed homes, compared with 17 per cent in apartments or condos and 78per cent in public housing.
Urban Redevelopment Authority Data (URA), which was provided over the five years from 2019 to 2023, showed that there were between 1300 and 1,800 homes sold every year.
2021 was an exceptional year – the volume of sales was a whopping 3,080. In the wake of the Covid-19 outbreak, many people realized they needed a larger living area to accommodate larger households and to allow them to work from home.
GCB Deals Slowed as Prices Increased
Good Class Bungalows Areas (GCBs) are at or near the top of landed homes. The GCBs are large detached houses that have large land parcels. These are protected with strict planning restrictions, in order to maintain the low-rise and exclusivity. URA has identified 39 GCB Areas. These include Nassim Road Whitehouse Park Chatsworth Park. In these GCB Areas there are approximately 2,700 detached houses. This is expected to continue in the longer term.
The 18 GCB shipments in 2023 represent the lowest sales volume for a calendar year since 1996.
The luxury sector was hit hard by the declining sentiment that stemmed from global economic uncertainties, rising rates of interest, property cooling in April and anti-money launderers raids in august.
Also, buyers were hesitant to purchase because they thought that asking prices for properties were too high. The buyers were not willing to pay extra unless a house was unique, had a great location, or had upscale finishes.
In the period between 2020 and 2023, the price of the average GCB increased by 30%.
What direction is the market heading?
In 2024 the outlook is still cloudy. One of our observations is that, because of the additional stamp duty increases (in April 2023 and December 2021), most GCB-buyers in 2022 were Singaporeans. They were mostly businessmen or professionals in their early to mid-40s.
In light of current uncertainties, and in the aftermath of the Israel/Hamas conflict as well as the Ukraine War, it is still unclear how many additional multimillionaires will be supporting this segment.
Owners of high-end homes will also pay more in property taxes. The rates of property taxes for owner occupied properties have increased, from 4 to 22 per cent to 4-32 per cent by 2024.
2023 has been the year with the least sales volume.
Singapore’s Residential Market was affected by a number of factors in 2023. These include global macroeconomic, geopolitical, and property cooling policies, as well a high-profile money launderette bust. Only 1,268 land parcels were transacted in the year. This was down from 1,681 transactions in 2022.
Despite lower home sales, landed prices have continued to trend up on a per-square foot basis. Prices for detached houses rose 8.4% year-on-year to S$1,699/psf. Semidetached home prices grew 12.4% at S$1,678/psf. Meanwhile, terrace house values rose 9.4% annually to S$1,888/psf.
For properties that have been rented, the rates went up from 11-27% in 2023 and 12-36% in 2020.
One might be the increased tax burden that leads some owners to decide to sell. On the contrary, a potential purchaser who had originally planned to acquire a GCB so as to benefit from high rental earnings may now decide that doing so is not attractive.
As a result of all these factors, we can expect to see a gradual slowdown in the sales during the first halves of 2024, and some moderated prices.
We also know that sellers are willing to drop their prices if they are willing buyers. Once that happens, prices would be more stable as the sales momentum improves.
